PayPal Aims to Challenge Alibaba With China Payments

By Mark Lee -
Mar 16, 2012

EBay Inc. (EBAY)’s PayPal unit aims to be
the first foreign operator with a license to process electronic
payments in China, allowing it to challenge local companies
including Alibaba Group Holding Ltd.’s Alipay affiliate.

“We are cautiously optimistic we’ll be given a license,”
after PayPal filed an application to the People’s Bank of China
late last year, Senior Vice President for Asia Rupert Keeley
said at a briefing in Hong Kong today. No overseas companies
have so far been awarded a permit to process domestic payments
in China, he said.

A license would allow PayPal to handle domestic payments in
the world’s fastest-growing major economy, where it already
helps businesses and consumers with cross-border transactions.
China’s central bank awarded licenses last year to local
operators including Alipay, owned by Alibaba’s billionaire
Chairman Jack Ma, to let them process payments as the country’s
e-commerce market grew to an estimated $121 billion.

PayPal may offer its new PayPal Here card-swiping device in
mainland China once it receives the domestic payment license,
Keeley said. He said he couldn’t predict when the permit will be
obtained.

Alipay, formerly owned by Alibaba Group, had a 47 percent
share of China’s Internet payment market in the fourth quarter,
according to research company Analysys International. Second-ranked Tenpay, a unit of Tencent Holdings Ltd. (700), had a market
share of 21 percent, according to the researcher.

Alipay Transfer

Alibaba Group, part-owned by Yahoo! Inc. (YHOO), said last May it
had to transfer Alipay to a company that’s majority owned by Ma
to facilitate its application for a payment license from the
central bank. In July, Yahoo agreed to a compensation deal that
may result in Alibaba Group receiving as much as $6 billion from
Alipay.

PayPal, the fastest-growing unit at EBay, the biggest U.S.
online marketplace, said yesterday it started offering the
PayPal Here device in the U.S., Canada, Australia and Hong Kong.
The device, which works with Apple Inc.’s iPhone, can swipe
credit cards and scan checks.

In the coming months, PayPal plans to open an office in
India to expand its operations in Asia, in addition to a few
other markets in the region, Keeley said, without giving a more
specific time frame. At present, PayPal has offices in six Asian
markets including China, Hong Kong, South Korea and Singapore.